Based on the information recently released by the Ministry of Finance regarding the $350 increase for gasoline and the $580 increase for diesel, March inflation is expected to rise from +0.5% to +0.9%. 

Meanwhile, the increase is estimated to be as high as Inflation rose by 1.4% in April, as a direct result of this adjustment in fuel prices, although the indirect effects should be partially offset by other measures that have been announced.  

Looking ahead, medium-term inflation will depend more on the duration of the conflict in the Middle East and the dynamics of international oil prices than on MEPCO itself. Under our baseline scenario, inflation for 2026 should be above 4.0%. 

However, if the conflict in the Middle East drags on or intensifies, inflation could rise even further. In an alternative scenario, it is not out of the question to see levels above 5.0%, given an oil price of around US$120 per barrel and tighter global financial conditions. 

In this context, we do not expect any changes in the Central Bank’s stance, keeping the rate at 4.5%, on the understanding that these shocks have short-term effects but also end up affecting demand in the medium term. 

From a strategic standpoint, in the fixed-income sector we continue to recommend prioritizing short- and medium-term UF instruments, which allow investors to better capture this higher inflationary rate. 

In the equity market, the latest announcements—given their impact on both inflation and growth, through lower domestic demand, reduced public spending, and weaker mining output (according to the IPOM’s March projections)—may put pressure on local equities in the short term. However, we do not see any structural changes in the IPSA thesis and maintain a constructive outlook in the medium and long term. 

That said, the market is already beginning to make distinctions. Against a backdrop of weaker domestic demand and higher inflation, there are clear “relative losers” in basic and discretionary consumption, where the recent performance of companies like Cencosud and Falabella is no coincidence. 

On the other hand, “relative winners,”are beginning to emerge, with the banking sector standing out in particular. In a context of higher inflation, banks tend to benefit from improved margins, which translates into a positive impact on earnings. 

Assuming inflation remains in the 4.0%–4.5% range, we estimate that profits could increase by around 5%, even exceeding current market estimates. 

Within the sector, Banco de Chile appears to be the best positioned, both due to its greater sensitivity to inflation and the quality of its balance sheet. In a scenario of higher inflation, it could achieve return on equity (ROAE) levels of around 23%, positioning itself as one of the most attractive banks in terms of return. 

That said, it is important to understand that this is not a completely linear relationship. A higher-inflation environment can also lead to slower credit growth and some pressure on asset quality. However, on balance, the impact remains positive in the short term, especially for banks with higher coverage ratios and better portfolio quality. 

In short, in the current environment, banks—and particularly Banco de Chile—appear to be one of the clearest ways to capture the positive effect of higher inflation within the IPSA. 

DISCLAIMER.

Felipe de Solminihac
Head of Strategy